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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

Nadia is a higher rate taxpayer with a CGT liability of £20,000 for a tax year that was due for payment on 31 January but which she paid 60 days late. Which statement about the interest position is correct, using the ATX-UK tax table rates?

Interest at 8.50% a year runs on the unpaid CGT from the due date until it is actually paid. The 3.50% overpaid rate, the 3.75% official rate and the VAT late payment penalty bands do not apply to late paid capital gains tax.

  1. AInterest of 3.50% a year runs from the due date, being the rate on overpaid tax
  2. BInterest of 3.75% a year runs from the due date, being the official rate
  3. CInterest of 8.50% a year runs on the unpaid £20,000 from the due date until paymentCorrect
  4. DNo interest runs unless payment is more than 30 days late, when a 6% penalty applies instead

Explanation

Late-paid tax carries interest at the 8.50% underpaid rate from the due date to payment, so 60 days costs about £20,000 × 8.5% × 60/365 = £279. The 3.50% rate is for overpaid tax. 3.75% is the official rate for benefits. The VAT penalty bands do not apply to CGT.

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